The Fed and the Corporate World understand that there is NO economic recovery. They need to keep feeding this bull market with plenty of accommodative easing or this bull will die. The Fed will do whatever it takes to maintain this by cutting rates to near zero and below so as to spruce up the economy. However, these conventional policies that are being applied by the Fed will not work…seeing as the deflationary forces have gained momentum. Global economies cannot sustain rate hikes. They will continue to use expansionary monetary policies, indefinitely.
The Fed will no longer remain the lone wolf Central Bank by keeping interest rates from going negative. The New Zealand Central Bank went through this same cycle last year, when its economy could not sustain a rate hike. Consequently, this resulted in a quick cycle of rate cuts.
The herd mentality is now at the stage where they must accept this as the new norm. They want to keep this illusion alive and do not want to deal with the reality.
When the Fed does implement negative interest rates, the stock markets are going to soar so high that it will probably even shock the bulls. Thus, this is the reasoning that the market will not currently crash, but will experience sharp corrections. In this current market environment, I now recommend putting your money into precious metals.
This is one of the most detested bull markets in history. The Fed has provided this market with the ingredients that it needs to take it to the bubble level. The masses will embrace this market in the same manner as the corporate world has done so for the past eight years.
The main trigger for the financial crisis of 2008 was the issuance of mortgages that did not require down payments. The ease at which one could get mortgages in the past is what drove housing prices to unsustainable levels.
Currently, Barclays has launched the Family Springboard Mortgage, which allows home buyers the opportunity to purchase a property with a mere 5% deposit. In order to acquire this 5% deal, one will need guarantors to put up the cash, which in turn will be lost if one fails to repay the mortgage.
One’s family/guarantor must place savings which are equal to 10% of the purchase price into a Barclays Helpful Start savings account. No withdrawals are allowed for three years. The Helpful Start savings account pays the Bank of England’s base rate plus 1.5%, which currently means getting 2% interest before taxes. This is not a lot of interest considering the lengthy period of time:
When the Fed starts purchasing private assets, this will negatively impact economic growth and consumers’ well-being. This reasoning is that the Fed will use this power to keep failing companies alive – and thus prevent the companies’ assets from being used to produce goods or services which are more highly valued by consumers.
Over 50% of Americans do not have enough money to invest in stocks. Unfortunately, the US is currently appearing to be closer to that of a third world nation. Americans appear to be living hand to mouth, thus making it more and more difficult for the average person to focus on his/her financial security. One in every seven Americans currently depend on food stamps in addition to using Food Banks, despite this ‘so-called economic recovery’.
The chart below from Banktrate.com illustrates that a total of 74% of individuals either do not have enough money to invest in the stock market or they do not know anything about stocks.
Random tests have already shown that the monkeys with darts fare better than most of these experts would.
The severe economic contractions which I have been speaking about over the last couple of years, should now be evident to all of us. Productivity has now fallen to a negative rate. Investment has stalled – and individuals have turned against globalization. Without productivity growth, capitalism becomes unpopular, globalization becomes unpopular – and in turn politicians become unpopular.
Gold and silver should be viewed as a form of insurance against the impending future financial disaster. We will also experience another disaster, sooner or later. I am not advocating that you should load up on bullion in view that precious metals sector has put in a bottom. Rather, I am suggesting one should obtain insurance against another financial crisis that has the potential to be more severe than was the 2008 financial crisis.
Every crisis also brings with it an opportunity. Therefore, one should make the best use of this opportunity before the price of gold and silver jump in value. It is better to invest now and see one’s investments multiply, rather than waiting for the crisis to commence – and subsequently pay a premium for insurance.
Courtesy of www.TheGoldAndOilGuy.com